Implementing Healthcare Reform

The Patient Protection and Affordable Care Act

Other Provisions
 

HEALTH INSURANCE EXCHANGES

American Health Benefit Exchanges

Each State is required to establish its own health insurance exchange by 1/1/14. The exchanges will be used to help individuals and employers purchase qualified health plans. States have the option of having separate exchanges for individual coverage and employer-sponsored group coverage.

Plans offered in an exchange will receive ratings from HHS based on quality and price. Beneficiary satisfaction survey results for each plan will also be made available. All such information will be available online.

Exchange will receive Federal start-up funds, but are required to be self-sufficient no later than January 1, 2015.

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Functions of an Exchange

The responsibilities of each State-based exchange are as follows:

  • Certify all participating plans as Qualified Health Plans
  • Operate a telephone assistance hotline
  • Operate a website containing comparative information on all participating plans
  • Rate each participating plan
  • Present health benefit plan options using the HHS standardized reporting requirements
  • Inform resident of eligibility requirements for Medicaid and CHIP and enroll any eligible residents
  • Certify eligible individuals as exempt from the individual coverage mandate
  • Provide to each employer the names of each of their employees exempt from the individual coverage requirement

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Enrollment Periods

Exchanges are required to have the following enrollment periods:

  • An initial open enrollment period – prior to the exchange’s implementation
  • Annual open enrollment periods
  • Special enrollment periods

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Additional Benefits

States may require plans in their exchange(s) to cover additional benefits that are not defined essential health benefits. For any resident receiving a credit, the State must pay any increased costs directly to their plan due to additional mandated benefits.

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Levels of Coverage

The following are the coverage tiers in which plans will be offered:

  • A plan in the Bronze Level shall provide coverage that is designed to provide benefits that are actuarially equivalent to 60% of the full actuarial value of the benefits provided
  • A plan in the Silver Level shall provide coverage that is designed to provide benefits that are actuarially equivalent to 70% of the full actuarial value of the benefits provided
  • A plan in the Gold Level shall provide overage that is designed to provide benefits that are actuarially equivalent to 80% of the full actuarial value of the benefits provided
  • A plan in the Platinum Level shall provide coverage that is designed to provide benefits that are actuarially equivalent to 90% of the full actuarial value of the benefits provided

The level of coverage of a plan shall be determined on the basis that the essential health benefits shall be provided to a standard population (and without regard to the population in which the plan may actually provide benefits).

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Catastrophic Plans

Carriers may offer a catastrophic-only plan through an insurance exchange. Coverage purchased by eligible individuals will satisfy the individual coverage mandate. To be eligible to purchase coverage through a catastrophic plan, an individual must:

  • Be under the age of 30 at the start of the plan year; or
  • If other coverage is deemed unaffordable due to:
    • An individual’s contribution exceeds 8% of income (net income + coverage amount)
    • An individual suffers a hardship, as deemed by HHS

Effective date – 1/1/14

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Free Choice Vouchers

Plan sponsors of employer-based plans (including self-insured) are required to offer vouchers to employees who meet un-affordability requirements for use to purchase coverage through an insurance exchange.

Employees eligible for a voucher are ones:

  • Whose contribution for coverage is between 8% and 9.8% of their household income for the taxable year which ends with or within the plan year; and
  • Whose household income is less than 400% of Federal Poverty Level (FPL); and
  • Does not participate in any health plan offered by the employer

The amount of any free choice voucher provided shall be equal to the monthly portion of the cost of the eligible employer-sponsored plan which would have been paid by the employer if the employee were covered under the plan with respect to which the employer pays the largest portion of the cost of the plan.

An Exchange shall credit the amount of any voucher to the monthly premium of any qualified health plan in the Exchange in which the qualified employee is enrolled and the offering employer shall pay any amounts so credited to the Exchange.

If the amount of the voucher exceeds the amount of the premium of the qualified health plan in which the qualified employee is enrolled for such month, such excess shall be paid to the employee.

The cost of the voucher will not count as taxable income for any recipient.

The cost of any vouchers to an employer is deductible for such employer.

Effective date – 1/1/14

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Reviews of Proposed Premium Increases

Exchanges may require participating plans to submit a justification for any premium increase prior its implementation. Plans would then be required to post that information online. The State would then make a determination as to whether the plan would still be allowed to be offered through its exchange.

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Multi-State Exchanges

Exchanges may operate in more than one State if it is approved by each State in which it would operate and if it is approved by HHS.

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Ability for States to Establish Multiple Exchanges

States may choose to establish one or more subsidiary exchange if such an exchange serves a geographically distinct area that is as large as a rating area within the State.

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Ability of Exchanges to Contract with Service Providers

A State may contract with private entities to carry out functions of the exchange. To be eligible, the entity must be incorporated by at least one State, have demonstrated experience in the individual and small group markets as well as in benefits and coverage and is not a health insurance issuer.

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Quality Incentives

States may choose to provide incentives to plans, including increased reimbursements for areas that improve quality such as, improving health outcomes, prevention of hospital readmissions, improvements in patient safety and the implementation of prevention and wellness programs.

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Mental Health Parity

All exchange plans will have to comply with current mental health parity standards as applied to health plans and health insurers.

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Employer Coverage Through an Exchange

Employers may purchase coverage for their employees through an exchange. The employer may choose the level of plan they will cover. Employees would then choose a plan within that level.

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Large Employer Eligibility

Starting in 2017, States may open their exchanges up to large employers.

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Stand Alone Dental Plans

Exchanges may allow stand alone dental benefit plans to be offered through their exchange. Plans at a minimum must offer pediatric dental benefits.

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CO-OPs

Non-profit, member-run insurance issuers known as, Consumer Operated and Oriented Plans (CO-OPs) will be allowed to offer coverage through the State insurance exchanges.

Federal loans will be provided for start-up costs. Grants will be awarded to help plans meet solvency requirements. Loans and grants will be awarded no later than 7/1/13. Loans are required to be paid back in 5 years; grants are required to be paid back in 15.

The following are the guidelines CO-OPs must follow:

  • All profits made by the plan must be used to lower premiums, improve benefits or for programs intended to improve the quality of healthcare of its members
  • In order for an issuer to offer a CO-OP, it must be organized under State law as a non-profit, member organization
  • Issuers may not be sponsored by a State or local government
  • Plans must meet all insurance laws of the State in which they operate

Governance standards of CO-OPs include:

  • That the governance of the organization be subject to a majority vote of its members
  • That its governance documents incorporate ethics and conflict of interest standards protecting against insurance industry involvement and interference
  • That the organization operates with a strong consumer focus, including timeliness, responsiveness and accountability to members

Plans that are in non-compliance will be assessed a penalty off 110% of any loans and grants amount that the plan was awarded.

If no health insurance issuer applies to be a qualified non-profit health insurance issuer within a State, HHS may use amounts appropriated for the awarding of grants to encourage the establishment of a qualified non-profit health insurance issuer within the State or the expansion of a qualified non-profit health insurance issuer from another State to the State.

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(Please note: This document was produced by the Self-Insurance Institute of America to provide an overview of the Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act. It does not cover every aspect of the legislation, and certain provisions of the law may change or be modified by additional rules and regulations. This document does not constitute legal or tax advice.)